10-Q

 

UNITEDSTATES 

SECURITIESAND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 

FORM 10-Q 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

Forthe quarterly period ended December 31,2014 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 

CommissionFile No. 333-176684 

NUZEE,INC.

____________________________________________________________________________________

(exactname of registrant as specified in its charter) 

Nevada                                                       38-3849791 

_________________________________________________________________

(Stateor other jurisdiction of incorporation or organization) 

   _________________________________________________________________

(I.R.S.Employer Identification Number) 

10815 Rancho Bernardo Road, Suite 250, San Diego, CA, 92127

_________________________________________________________________________________________

(Addressof principal executive offices) (zip code) 

(858) 385-9090or toll free (844) 936-8933 

 ______________________________________________________________________________________________

(Registrant’stelephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: 

Titlesof each class                                                    Nameof each exchange on which registered 

________________________________________________________________________________________________

None                                                                                            N/A                                        

Indicateby check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90  days.Yes xNo ¨

Indicateby check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was        required to submit and post such files).                  Yes x No ¨

 

Indicateby check mark whether the registrant is a  large accelerated  filer, an accelerated  filer, a  non-accelerated filer or a  smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

Largeaccelerated filer	¨		Acceleratedfiler	¨
Non-acceleratedfiler	¨	(Do not check if smaller reporting company)	Smallerreporting company	x

Indicate by check mark whether the registrant is a  shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes ¨No x

APPLICABLEONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THEPRECEDING FIVE YEARS: 

Indicateby check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes ¨No ¨

(APPLICABLEONLY TO CORPORATE REGISTRANTS) 

Indicatethe number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of February 5, 2015 NuZee, Inc. had 27,443,718 shares of common stock outstanding. 

Tableof Contents 

PART I. 

Item1.         Financial Statements. 

(a)Balance Sheets at Decemeber 31, 2014 (Unaudited) and September 30, 2014. 

(b)Statement of Operations for the three months ended  December 31, 2014 and 2013 (Unaudited). 

(c)Statement of Cash Flows for the three months ended December 31, 2014 and 2013 (Unaudited). 

(d)Notes to Financial Statements (Unaudited). 

Item2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations. Item 3.       Quantitative and Qualitative Disclosures About Market Risk. 

Item4.        Controls and Procedures 

Item1.         Legal Proceedings Item 1A. Risk Factors 

PARTII. 

Item2.         UnregisteredSales of Equity Securities and Use of Proceeds Item 3.        Defaults Upon Senior Securities 

Item4.         Mine Safety Disclosures 

Item 5.        OtherInformation 

Item6.         Exhibits 

2

 

FORWARD-LOOKINGINFORMATION 

ThisQuarterly Report on Form 10-Q of NuZee,  Inc.contains “forward-looking statements” that may state our management’s plans, future events, objectives, current expectations, estimates, forecasts, assumptions or projections about the company and its business. Any statement in this report that is not a statement of historical fact is a forward-looking statement,  andin some cases, words such as “believes,” “estimates,” “projects,” “expects,” “intends,” “may,” “anticipates,” “plans,” “seeks,” and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual outcomes and results to differ materially from the anticipated outcomes or results. These statements are not guarantees of future performance, and undue reliance should not be placed on these statements. It is important to note that our actual results could differ materially from  whatis expressed in our forward-looking statements due to the risk factors described in the section of our Form 10-K filed on February 12,2015 entitled “Risk Factors.” 

Weundertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 

3

 

PARTI. 

Item1. Financial Statements. 

Nuzee, Inc. BALANCE SHEETS (unaudited)
		December 31, 2014		September 30, 2014
ASSETS
Current assets:
Cash	$	139,203	$	238,160
Accounts receivable		4,884		5,205
Inventories		83,963		50,881
Prepaid expenses and deposits		44,626		69,099
Total current assets		272,676		363,345
Equipment, net		31,750		33,368
Total assets	$	304,426	$	396,713
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		38,381		43,384
Other current liabilities		8,852		8,180
Total current liabilities		47,233		51,564
Stockholders' equity:
Preferred stock; 100,000,000 shares authorized, $0.00001 par value;                        0 shares issued and outstanding		-		-
Common stock; 100,000,000 shares authorized, $0.00001 par value;                    30,619,719 and 30,599,719 shares issued;		306		306
Additional paid in capital		5,160,674		4,968,609
Accumulated deficit		(4,821,047)		(4,518,766)
Less: treasury stock, at cost (2,156,000 and 2,736,000 shares repurchased,                        $0.03838 per share)		(82,740)		(105,000)
Total stockholders' equity		257,193		345,149
Total liabilities and stockholders' equity	$	304,426	$	396,713

The accompanying notes are an integral part of these unaudited financial statements.

F-1

 

Nuzee, Inc. STATEMENTS OF OPERATIONS (unaudited)
			Three Months Ended December 31, 2014	Three Months Ended December 31, 2013
	Revenues		$                                      41,016	$                                                -
	Cost of sales		35,517	-
		Gross Profit (loss)	5,499	-
	Operating expenses		306,980	1,402,880
	Loss from operations		(301,481)	(1,402,880)
	Other income		-	143
	Other expense		800	-
	Net loss		$                                 (302,281)	$                              (1,402,737)
	Basic and diluted loss per common share		$                                       (0.01)	$                                          0.05
	Basic and diluted weighted average number of common stock outstanding		28,099,371	31,135,757

The accompanying notes are an integral part of these unaudited financial statements.

F-2

 

Nuzee, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
					Three months Ended December 31, 2014		Three months Ended December 31, 2013
Operating activities:
		Net loss		$	(302,281)	$	(1,402,737)
Adjustments to reconcile net loss to net cash used by operating activities:
		Depreciation			1,618		468
		Option expense			17,992		1,053,755
		Warrant expense			9,134		-
	Change in operating assets and liabilities:
		Accounts receivable			321		13,195
		Inventories			(33,082)		(35,421)
		Prepaid expenses and deposits			24,473		(46,023)
		Accounts payable			(5,004)		4,538
		Other current liabilities			672		(9,563)
			Net cash used by operating activities		(286,157)		(421,788)
	Investing activities:
		Purchase of equipment			-		(1,927)
			Net cash used by investing activities		-		(1,927)
	Financing activities:
		Proceeds from insuance of common stock			13,200		-
		Proceeds from insuance of treasury stock			174,000		-
			Net cash provided by financing activities		187,200		-
	Net change in cash				(98,957)		(423,715)
	Cash, beginning of period				238,160		1,110,661
	Cash, end of period			$	139,203	$	686,946
	Non-cash investing and financing activities:
		Forgiveness of related party receivable		$	-	$	139,661
		Forgiveness of debt		$	-	$	(50,000)
		Cancellation of common stocks		$	-	$	(89,661)

The accompanying notes are an integral part of these unaudited financial statements.

F-3

 

Nuzee,Inc. 

NOTESTO FINANCIAL STATEMENTS 

(Unaudited)

December 31, 2014 

1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Theaccompanying unaudited interim financial statements of Nuzee, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the initial period ended September 30, 2014 as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the annual report on Form 10-K have been omitted. 

GoingConcern 

Theaccompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The  Companyhas had recurring losses, large  accumulateddeficits, is dependent on the shareholder to provide additional funding for operating expenses and has no recurring revenues. These items raise substantial doubt about the Company’s ability to continue as a going concern. 

2.RELATED PARTY TRANSACTIONS 

During November 2014, the Company paid $9,000 for consultation charge of Lotus Cup to an entity, From East Holdings Co., Ltd., controlled by the Company’s major shareholder

3.INTELLECTUAL PROPERTY

The Company has been granted licenses to use the trademarks CEREBOOST and SVETOL in Company materials and on product packaging. Pursuant to the Trademark License Agreements dated October 11, 2013, the agreement may be terminated by either party, without cause, upon 30 days written notice. Additionally, if the Company fails to purchase the annual minimum amount (500 kg) of product from the licensor for any 12 month period, the licensor may terminate the Company’s license upon 15 days written notice.

4.COMMON STOCK 

   
           During November 2014, the Company resold 130,000 shares of treasury stock at $0.30 per share, for an aggregate purchase price of $39,000.

          
           During December 2014, the Company resold 450,000 shares of treasury stock at $0.30 per share, for an aggregate purchase price of $135,000.

           During December 2014, the Company sold 20,000 shares of common stock at $0.66 per share, for an aggregate purchase price of $13,200.

5.STOCK OPTIONS 

DuringOctober 2013 the Company granted 3,471,665 options to employee. The right to exercise these options shall vest and become 25% exercisable on the first anniversary of when granted, with the exception that 100% of options issued to one employee vested immediately. The remaining options shall vest and become exercisable ratably over the next 36 months, with the exception that options issued to 2 employees shall vest and become exercisable over 18 months and option issued to one employee shall vest and become exercisable as of the effective date of the Option Agreement. The exercise price is $0.48 per share and will expire ten years from the grant date, unless terminated earlier as provided by the Option Agreements. 

Thefair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model using the assumptions noted as follows: expected volatility was based on historical trading in the company's stock. The expected term of options granted was determined using the simplified method under SAB 107 and represents one-half the exercise period. The risk-free rate is calculated using the U.S. Treasury yield curve, and is based on the expected term of the option. The Company has estimated there will be no forfeitures. 

TheBlack-Scholes option pricing model was used with the following weighted average assumptions for options granted during the three months ended December 31, 2014: 

Risk-freeinterest rate 1% - 2% Expected option life 5-6 yearsExpected volatility 300% 

Expecteddividend yield 0.0% 
      

During the three months ended December 31, 2014, 2,978,124 options are exercisable and the Company recognized $17,992 of stock options expenses. Unamortized option expense as of December 31, 2014 for all options outstanding amounted to approximately $23,343.

F-4

 

6.STOCK WARRANTS
      

During April, 2014, the Company granted 100,000 warrants to advisors.  The right to exercise these warrants shall vest in equal eight quarterly installments over the twenty-four (24) months following the date their vesting begins, subject to their continued engagement as a service provider though each such date. The exercise price equal to the current fair market valueper share on the date of grantand will expire ten years from the grant date, unless terminated earlier as provided by the  WarrantAgreements. 

   
TheBlack-Scholes warrant pricing model was used with the following weighted average assumptions for options granted during the three months ended  December 31, 2014: 

Risk-freeinterest rate 2.53% Expected life 10 years

Expectedvolatility 300% 

Expecteddividend yield 0.0%   
     

During the three months ended December 31, 2014, 37,500 warrants are exercisable and the Company recognized $9,134 of  warrant expenses.

7.SUBSEQUENT EVENTS  

During January 2015, the Company resold 140,000 shares of treasury stock at $0.30 per share, for an aggregate purchase price of $42,000.

             
          During January 2015, the Company cancelled 1,160,000 shares of common stock.

F-5

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 

Thefollowing plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial  condition.The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect,  estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward- looking statements. These forward-looking statements are subject to certain risk  sand uncertainties that could cause actual results to differ materially from our predictions. 

Planof Operations 

ShortTerm Goals (9 Months) 

            Over the next 9 months, the Company’s growth plans include continuing efforts to:

·Build a targeted distribution network for our Coffee Blenders functional beverages by signing the retailers that serve the K-cup and Coffee replenishment channels;

·Increase awareness for Coffee Blenders through communications and sampling programs;

·Establish the Nuzee brands top 3 in their product categories consistent with our mission of providing natural products that work.

We have retained and plan to expend our sales and marketing team who can immediately contribute to our network of US and international channels as such seeding our product becomes a near term priority.  We have already started developing working relationships with key online and national distributors who serve the coffee and single-serve pod consumers.  We plan to accelerate our traction by using manufacturer representatives with food and beverage experience. 

In order to build distribution the Company is first determining the total distribution launch cost among the potential channels as each has their own upfront and recurring cost structure.  Under investigation are the following company directed channels:

·direct – coffeeblenders.com shopping via search and digital marketing

·e-commerce affiliates (such as Amazon)

·select health and wellness retailers

·key mass/grocery retailers

·Club/Other 

Each of the above is compared using a host of costing parameters not limited to the following: product slotting fees, overall margin requirements, market development fees, return allowances, broadcast advertising and promotional marketing plans, in-store and channel detailing, product sampling and customer demoing as well as transportation and logistics cost, cross dock fees, shelf-life expiration swaps, and initial and recurring inventory loading levels. 

In conjunction with the above channel assessment, the Company is also exploring custom and private labeling whereby the company licenses the product formulation, trademarks, and other assets in two ways:

1.       Multi-Level Marketing (MLM) Firms – for example manufacturer on behalf of “Amway” for product extensions of their Great Value and Equate private brands. 

2.       Product Brands – for example license to “Maxwell House” the Coffee Blender product as a new product line extension to expand their single-serve business.

TheCompany plans going forward include the following milestones: 

4

 

Milestone	Timing	Est. Cost/Funding Source
1.Finalize Products & Pricing -           New Product Functions and Versions	December – February (Phase I) March-May (Phase II)	$25,000 (Phase I) $20,000 (Phase II) Previous Sale of Equities
2.Staff (retain and expand)	February - June	$20,000-30,000/Mo. Recurring Previous Sale of Equities
3.Launch Market and Promotion Plan -           PR  -           Sampling  -           Advertising	January – Ongoing	$500,000-$750,000 Annual Previous and Future Sale of Equities + Product Contribution
4.Explore OEM/Private Label Opportunities	March – Ongoing	n/a

Ifwe are unable to receive funding our plans will be dramatically and negatively impacted such that we will prioritize go to market strategies based on reduced operations and available capital. 

LongTerm Goals (Five Years) 

TheCompany believes that there will be significant expansion opportunities in existing markets through new products as well as in new regions outside of the United States in a combination of market development and product licensing. 

TheCompany believes that our limited resources may pose a challenge to our expansion goals and therefore anticipates that it may require additional capital  infuture years to fund expansion. There can be no  assurancethat our expansion strategy will be accretive to our earnings within a reasonable period of time. However, the Company believes that it can improve its operational efficiencies and reduce the need for new capital by carefully managing the business based on the following economic fundamentals within accretive margin and cost contribution modeling. 

Resultsof Operations 

From inception on November 9, 2011 through December 31, 2014, we have accumulated losses of 4,821,047. This loss was attributed to $4,540, 688 of operating expenses.

We are presently in the development phase of our new product platform for functional beverages and we can provide no assurance that we will be able to attain profitability.

During the three months ending December 31, 2014, we earned revenues of $41,016 from sales of our products and incurred operating expenses in the amount of $297,980. These operating expenses included the research and the preparation of our business plan in addition to general and administrative expenses. We anticipate our operating expenses will increase as we further undertake our plan of operations. The increase will be attributed to costs associated with production, storage and delivery of our products as well as research and development of new products.

We expect sales in 2015 from our new products through a combination of direct to consumer through our website portal, product awareness as well as through affiliate online stores and retailers.

Liquidityand Capital Resources 

Asof September 30, 2014  wehad  a cash balance of $238,160 and $139,203 at December 31, 2014.  Total assets decreased by 23% from $396,713 at September 2014 to $304,426 at December 31, 2014.

As of December 31, 2014 we had current liabilities of $47,233 and $51,564 at September 30, 2014. Accounts Payable decreased by approximately 12 % to $38,381 as of December 31, 2014 from $43,384 at September 30, 2014. Other Current Liabilities increased by approximately 8%  to $8,852 as of December 31, 2014 from $8,180 at September 30, 2014 mainly due to legal fees accrual and deferred product costs.

Our current ratio decreased from 705% in September 30, 2014 to 577% as of December 31, 2014.

Our auditor has indicated that there is substantial doubt about our ability to continue as a going concern as a result of our lack of significant revenues, and if we are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations.  Our financial statements do not include adjustments that might result from the outcome of this uncertainty.

Ourcurrent cash balance as of December 31, 2014 is not sufficient to fund our operations for the next twelve months. Therefore, the Company intends to engage in additional financing through the sale of  equitysecurities. 

5

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk. 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item4. Controls and Procedures 

Asof the end of the period covered by this Report, the Company’s President, and principal financial officer (the “Certifying Officer”),  evaluatedthe effectiveness of the Company’s “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the officer concluded that, as of the date of the evaluation, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed in the Company’s periodic filings under the Securities Exchange Act of 1934 is accumulated and communicated to management to allow timely decisions regarding required disclosure. 

TheCertifying Officer has also indicated that there were no changes in internal controls over financial reporting during the Company’s last fiscal quarter, and no significant changes in our internal controls or other factors that could significantly  affectsuch controls subsequent to the date of their evaluation and there were no corrective actions with regard to significant deficiencies and material weaknesses. 

Ourmanagement, including the Certifying Officer, does not expect that our disclosure controls or our internal controls will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be  Consideredrelative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making  can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective control system, misstatements  Dueto error or fraud may occur and not be detected. 

Item1. Legal Proceedings None. 

Item1A. Risk Factors 

PARTII. 

6

 

Therehave been no changes to our risk factors from those disclosed in our Form 10-K filed on February 12, 2015. 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

   
Therewere no unregistered Sales of Equity Securities during the quarter ending December 31, 2014. 

Item3. Defaults Upon Senior Securities None. 

Item 4.Mine Safety Disclosures Not applicable.

Item 5. Other Information 

     None.

Item 6.Exhibits 

EXHIBITNO.	DESCRIPTION
31.1*	Certificationof Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
	adoptedpursuant to Section 302 of the Sarbanes-Oxley  Actof 2002
31.2*	Certificationof Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
	adoptedpursuant to Section 302 of the Sarbanes-Oxley  Actof 2002
32.1*	Certificationof Chief Executive Officer and Chief Financial Officer pursuant to 18
	U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
	of2002
32.2*	Certificationof Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
	adoptedpursuant to Section 906 of the Sarbanes-Oxley  Actof 2002

101**	Interactive Data File
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

*

Filed herewith.

**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

7

 

SIGNATURES

Pursuantto the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 

Date:	February 23, 2015	NUZEE, INC.
		By:	/s/ Masateru Higashida
			Masateru Higashida, Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer)

8

EX-31

 

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Masateru Higashida, certify that:

1.      I have reviewed this report on Form 10-Q of NuZee, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5.     I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	February 23, 2015	NUZEE, INC.
		By:	/s/ Masateru Higashida
			Masateru Higashida, President, Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer), Secretary, Treasurer and Director (Sole Officer and Director)

2

EX-32

 

Exhibit 32.1

WRITTEN STATEMENT

PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of NuZee, Inc. and its subsidiaries (the “Company”) on Form 10-Q for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the Company’s Chief Executive Officer, Masateru Higashida, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	February 23, 2015	NUZEE, INC.
		By:	/s/ Masateru Higashida
			Masateru Higashida, President, Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer), Secretary, Treasurer and Director (Sole Officer and Director)

XML

4. COMMON STOCK

3 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

4. COMMON STOCK 

   
           During November 2014, the Company resold 130,000 shares of treasury stock at $0.30 per share, for an aggregate purchase price of $39,000.

          
           During December 2014, the Company resold 450,000 shares of treasury stock at $0.30 per share, for an aggregate purchase price of $135,000.

           During December 2014, the Company sold 20,000 shares of common stock at $0.66 per share, for an aggregate purchase price of $13,200.

XML

3. INTELLECTUAL PROPERTY

3 Months Ended

Dec. 31, 2014

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

3. INTELLECTUAL PROPERTY

The Company has been granted licenses to use the trademarks CEREBOOST and SVETOL in Company materials and on product packaging. Pursuant to the Trademark License Agreements dated October 11, 2013, the agreement may be terminated by either party, without cause, upon 30 days written notice. Additionally, if the Company fails to purchase the annual minimum amount (500 kg) of product from the licensor for any 12 month period, the licensor may terminate the Company’s license upon 15 days written notice.

XML

NuZee, Inc. - Consolidated Balance Sheets (USD $)	Dec. 31, 2014	Sep. 30, 2014
Current assets:
Cash	$ 139,203	$ 238,160
Accounts receivable	4,884	5,205
Inventories	83,963	50,881
Prepaid expenses and deposits	44,626	69,099
Total current assets	272,676	363,345
Equipment, net	31,750	33,368
Total assets	304,426	396,713
Current liabilities:
Accounts payable	38,381	43,384
Other current liabilities	8,852	8,180
Total current liabilities	47,233	51,564
Stockholders' equity:
Common stock; 100,000,000 shares authorized, $0.00001 par value; 30,619,719 and 30,599,719 shares issued;	306	306
Additional paid in capital	5,160,674	4,968,609
Accumulated deficit	(4,821,047)	(4,518,766)
Less: treasury stock, at cost (2,156,000 and 2,736,000 shares repurchased, $0.03838 per share)	(82,740)	(105,000)
Total stockholders' equity	257,193	345,149
Total liabilities and stockholders' equity	$ 304,426	$ 396,713

XML

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

The accompanying  unaudited  interim  financial  statements  of  Nuzee,  Inc.  have  been  prepared  in  accordance  with  accounting  principles  generally  accepted  in  the  United  States  of  America  and  rules  of  the  Securities  and  Exchange  Commission,  and  should  be  read  in  conjunction  with  the  audited  financial  statements  and  notes  thereto  contained  in  the  Company’s  annual  report  on  Form  10-K  for  the  initial  period  ended  September  30,  2014  as  filed  with  the  SEC.  In  the  opinion  of  management,  all  adjustments,  consisting  of  normal  recurring  adjustments,  necessary  for  a  fair  presentation  of  financial  position  and  the  results  of  operations  for  the  interim  periods  presented  have  been  reflected  herein.  The  results  of  operations  for  interim  periods  are  not  necessarily  indicative  of  the  results  to  be  expected  for  the  full  year.  Notes  to  the  consolidated  financial  statements  which  would  substantially  duplicate  the  disclosure  contained  in  the  audited  financial  statements  as  reported  in  the  annual  report  on  Form  10-K  have  been  omitted. 

GoingConcern 

The accompanying  financial  statements  have  been  prepared  in  accordance  with  accounting  principles  generally  accepted  in  the  United  States  of  America,  which  contemplates  continuation  of  the  Company  as  a going  concern.  The  Company has  had  recurring  losses,  large  accumulated deficits,  is  dependent  on  the  shareholder  to  provide  additional  funding  for  operating  expenses  and  has  no  recurring  revenues.  These  items  raise  substantial  doubt  about  the  Company’s  ability  to  continue  as  a  going  concern. 

XML

2. RELATED PARTY TRANSACTIONS

3 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

2. RELATED PARTY TRANSACTIONS 

During November 2014, the Company paid $9,000 for consultation charge of Lotus Cup to an entity, From East Holdings Co., Ltd., controlled by the Company’s major shareholder

XML

NuZee, Inc. - Consolidated Balance Sheets (Parentheticals) (USD $)	3 Months Ended	12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014
Preferred stock; shares authorized	100,000,000	100,000,000
Preferred stock; par value (in Dollars per share)	$ 0.00001	$ 0.00001
Preferred stock; shares issued	0	0
Preferred stock; shares outstanding	0	0
Common stock; shares authorized	100,000,000	100,000,000
Common stock; par value (in Dollars per share)	$ 0.00001	$ 0.00001
Common stock; shares issued	30,619,719	30,599,719
Less: treasury stock, at cost (2,736,000 shares repurchased, 0.03838 per share)	2,736,000	2,736,000
Less: treasury stock, at cost (2,736,000 shares repurchased, 0.03838 per share) (in Dollars per share)	$ 0.03838	$ 0.03838

XML

6. STOCK WARRANTS (Details)	3 Months Ended	120 Months Ended	127 Months Ended	135 Months Ended
	Dec. 31, 2014	Apr. 30, 2024	Apr. 30, 2024	Dec. 31, 2024	Apr. 29, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Class of Warrant or Right, Outstanding (in Shares)		3	3		100,000
Fair Value Assumptions, Risk Free Interest Rate	2.53%
Fair Value Assumptions, Expected Term		10 years
Fair Value Assumptions, Expected Volatility Rate			300.00%
Fair Value Assumptions, Expected Dividend Rate			0.00%
Class of Warrant or Right, Expense or Revenue Recognized				37,500

XML

Document And Entity Information	3 Months Ended
	Dec. 31, 2014	Feb. 05, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	NuZee, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding		27,443,718
Amendment Flag	false
Entity Central Index Key	0001527613
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2014
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

XML

7. SUBSEQUENT EVENTS (Details) (USD $)	Jan. 31, 2015	Dec. 31, 2014	Sep. 30, 2014
Subsequent Events [Abstract]
Common Stock, Shares, Issued	140,000	30,619,719	30,599,719
Shares Issued, Price Per Share (in Dollars per share)	$ 0.30	$ 0.66
Common Stock, Value, Issued (in Dollars)	$ 42,000	$ 306	$ 306
CancellationOfCommonStock	1,160,000

XML

NeZee, Inc. - Consolidated Statements of Operations (USD $)	3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Revenues	$ 41,016
Cost of sales	35,517
Gross Profit (loss)	5,499
Operating expenses	306,980	1,402,880
Loss from operations	(301,481)	(1,402,880)
Other income		143
Other expense	800
Net loss	$ (302,281)	$ (1,402,737)
Basic and diluted loss per common share (in Dollars per share)	$ (0.01)	$ 0.05
Basic and diluted weighted average number of common stock outstanding (in Shares)	28,099,371	31,135,757

XML

7. SUBSEQUENT EVENTS

3 Months Ended

Dec. 31, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

7. SUBSEQUENT EVENTS  

During January 2015, the Company resold 140,000 shares of treasury stock at $0.30 per share, for an aggregate purchase price of $42,000.

             
          During January 2015, the Company cancelled 1,160,000 shares of common stock.

XML

6. STOCK WARRANTS

3 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

6. STOCK WARRANTS
      

During April, 2014, the Company granted 100,000 warrants to advisors.  The right to exercise these warrants shall vest in equal eight quarterly installments over the twenty-four (24) months following the date their vesting begins, subject to their continued engagement as a service provider though each such date. The  exercise  price  equal to the current fair market value per  share on the date of grant and  will  expire  ten  years  from  the  grant  date,  unless  terminated  earlier  as  provided  by  the  Warrant Agreements. 

   
The Black-Scholes  warrant  pricing  model  was  used  with  the  following  weighted  average  assumptions  for  options  granted  during  the  three  months  ended  December 31,  2014: 

Risk-free interest  rate  2.53%  Expected  life  10 years

Expected volatility  300% 

Expected dividend  yield  0.0%   
     

During the three months ended December 31, 2014, 37,500 warrants are exercisable and the Company recognized $9,134 of  warrant expenses.

XML

4. COMMON STOCK (Details) (USD $)	0 Months Ended		1 Months Ended
	Dec. 31, 2014	Dec. 15, 2014	Nov. 30, 2014	Jan. 31, 2015
4. COMMON STOCK (Details) [Line Items]
Stock Issued During Period, Shares, New Issues	20,000
Shares Issued, Price Per Share	$ 0.66			$ 0.30
Proceeds from Issuance or Sale of Equity	$ 13,200	$ 135,000	$ 39,000
Development Stage Entities, Stock Issued, Shares, Issued for Cash		450,000
IssuedAt0.22PerShare
4. COMMON STOCK (Details) [Line Items]
Stock Issued During Period, Shares, New Issues			130,000
IssuedAt0.48PerShare
4. COMMON STOCK (Details) [Line Items]
Shares Issued, Price Per Share			$ 0.30
IssuedAt0.12PerShare
4. COMMON STOCK (Details) [Line Items]
Shares Issued, Price Per Share		$ 0.30

XML

Accounting Policies, by Policy (Policies)

3 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Fair Value of Financial Instruments, Policy [Policy Text Block]

The accompanying  unaudited  interim  financial  statements  of  Nuzee,  Inc.  have  been  prepared  in  accordance  with  accounting  principles  generally  accepted  in  the  United  States  of  America  and  rules  of  the  Securities  and  Exchange  Commission,  and  should  be  read  in  conjunction  with  the  audited  financial  statements  and  notes  thereto  contained  in  the  Company’s  annual  report  on  Form  10-K  for  the  initial  period  ended  September  30,  2014  as  filed  with  the  SEC.  In  the  opinion  of  management,  all  adjustments,  consisting  of  normal  recurring  adjustments,  necessary  for  a  fair  presentation  of  financial  position  and  the  results  of  operations  for  the  interim  periods  presented  have  been  reflected  herein.  The  results  of  operations  for  interim  periods  are  not  necessarily  indicative  of  the  results  to  be  expected  for  the  full  year.  Notes  to  the  consolidated  financial  statements  which  would  substantially  duplicate  the  disclosure  contained  in  the  audited  financial  statements  as  reported  in  the  annual  report  on  Form  10-K  have  been  omitted

Going Concern Note

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has had recurring losses, large accumulated deficits, is dependent on the shareholder to provide additional funding for operating expenses and has no recurring revenues. These items raise substantial doubt about the Company’s ability to continue as a going concern

XML

2. RELATED PARTY TRANSACTIONS (Details) (USD $)	Nov. 30, 2014
Related Party Transactions [Abstract]
Due to Related Parties	$ 9,000

XML

5. STOCK OPTIONS (Details) (USD $)	1 Months Ended	3 Months Ended
	Oct. 31, 2013	Dec. 31, 2014
Table Text Block Supplement [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	3,471,665
PercentageOfExercisableOptions	25.00%
Investment Options, Exercise Price (in Dollars per share)	$ 0.48
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		2,978,124
Stock Issued During Period, Value, Stock Options Exercised (in Dollars)		$ 17,992

XML

NuZee, Inc. - Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Operating activities:
Net loss	$ (302,281)	$ (1,402,737)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation	1,618	468
Option expense	17,992	1,053,755
Warrant expense	9,134
Change in operating assets and liabilities:
Accounts receivable	321	13,195
Inventories	(33,082)	(35,421)
Prepaid expenses and deposits	24,473	(46,023)
Accounts payable	(5,004)	4,538
Other current liabilities	672	(9,563)
Net cash used by operating activities	(286,157)	(421,788)
Investing activities:
Purchase of equipment		(1,927)
Net cash used by investing activities		(1,927)
Financing activities:
Proceeds from insuance of common stock	13,200
Proceeds from insuance of treasury stock	174,000
Net cash provided by financing activities	187,200
Net change in cash	(98,957)	(423,715)
Cash, beginning of period	238,160	1,110,661
Cash, end of period	139,203	686,946
Non-cash investing and financing activities:
Forgiveness of related party receivable		139,661
Forgiveness of debt		(50,000)
Cancellation of common stocks		$ (89,661)

XML

5. STOCK OPTIONS

3 Months Ended

Dec. 31, 2014

Table Text Block Supplement [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

5. STOCK OPTIONS 

During October  2013  the  Company  granted  3,471,665  options  to  employee.  The  right  to  exercise  these  options  shall  vest  and  become  25%  exercisable  on  the  first  anniversary  of  when  granted,  with  the  exception  that  100%  of  options  issued  to  one  employee  vested  immediately.  The  remaining  options  shall  vest  and  become  exercisable  ratably  over  the  next  36  months,  with  the  exception  that  options  issued  to  2  employees  shall  vest  and  become  exercisable  over  18  months  and  option  issued  to  one  employee  shall vest  and  become  exercisable  as  of  the  effective  date  of  the  Option  Agreement.  The  exercise  price  is  $0.48  per  share  and  will  expire  ten  years  from  the  grant  date,  unless  terminated  earlier  as  provided  by  the  Option  Agreements. 

The fair  value  of  each  option  award  was  estimated  on  the  date  of  grant  using  the  Black-Scholes  option  valuation  model  using  the  assumptions  noted  as  follows: expected  volatility  was  based  on  historical  trading  in  the  company's  stock.  The  expected  term  of  options  granted  was  determined  using  the  simplified  method  under  SAB  107  and  represents  one-half  the  exercise  period.  The  risk-free  rate  is  calculated  using  the  U.S.  Treasury  yield  curve,  and  is  based on  the  expected  term  of  the  option.  The  Company  has  estimated  there  will  be  no  forfeitures. 

The Black-Scholes  option  pricing  model  was  used  with  the  following  weighted  average  assumptions  for  options  granted  during  the  three  months  ended December 31,  2014: 

Risk-free interest  rate  1%  -  2%  Expected  option  life  5-6 years Expected  volatility  300% 

Expected dividend  yield  0.0% 
      

During the three months ended December 31, 2014, 2,978,124 options are exercisable and the Company recognized $17,992 of stock options expenses. Unamortized option expense as of December 31, 2014 for all options outstanding amounted to approximately $23,343.